Replies to post #47609 on Tytan Holdings Inc (TYTN)

[dmlabuda]

You asked about the A/D (accumulation / distribution) index and why it looks differently on the weekly chart than it does on the daily chart. It has to do with the way that index is calculated. I don't even like the indicator that much and I don't think I'm going to use it anymore on charts that I display. The ADI or Accumulation/distribution index was invented by Larry Williams. His original A/D index actually worked pretty good but, the reason it's not referred to as the Williams ADI is because no one uses Larry's original formula to calculate it and as such, (in my opinion) it provides erroneous results. The formula that Murphy uses at StockCharts.com is this:

1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)

2. Money Flow Volume = Money Flow Multiplier x Volume for the Period

3. ADL = Previous ADL + Current Period's Money Flow Volume

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:accumulation_distribution_line

Larry Williams original formula for step 1 above was (Close-Open) / (High-Low)

So, you can see that is quite a bit different. Now since the Close for the week differs from the closes calculated daily and the close is used to compute the ADI, that is why it can show you a different reading on the weekly or daily chart.

I personally believe that the original formula is more accurate and I questioned StockChart.com on that point but, never got an answer from them.

I use the ADI as confirmation in my analysis but, rarely do I pay attention to it when it appears to be in conflict with the stochastics.